Business entities in Oman

Since 2003, Healy Consultants assists our multi-national Clients’ with Oman business set up. This includes choosing the optimum corporate structure for doing business in Oman and complete the setup procedure on our Client’s behalf. Limited liability companies (Oman LLC) and sole proprietor companies (SPC) are the most common business vehicles utilized to do business in Oman.

Oman one-person company (OPC) / Sole Proprietorship entity (SPC) in Oman

1. As of January 2020, a limited liability company can be set up with a sole individual or corporate shareholder, a sole director and no miminum paid up share capital requirements. An SPC has the same features as an LLC except that it has only one shareholder; and
2. As of May 2020, there are only 37 business activities closed for foreign ownership. That said, over the coming months, the Ministry of Commerce and Industry (MOCI) is expected to release a new negative investment list;

Oman limited liability company (LLC)

1. The new foreign investment law has abolished i) the mandatory minimum share capital requirement and ii) the requirement for an Omani, GCC or USA shareholder mentioned below, hat said, due to lack of clear regulatory framework, it is advisable to confirm the same with MOCI on a case-by-case basis;
2. Depending on the industry sector, business activity and sizeable foreign investments, MOCI may request to follow the ‘old’ Foreign Investment Law on a case-by-case basis. According to the ‘old’ foreign investment law a local LLC is required to have i) two shareholders ii) one director (who can be one of the shareholders) iii) a minimum paid up capital of OMR150,000 (approx. US$390,000) and iv) a local address. Of the two required shareholders, one must be a national of Oman, a GCC state or the USA, and must own 30% of the company’s shares. The appointment of an auditor is also required;
3. Since the signing of the 2009 Free Trade Agreement, US citizens are treated as local citizens and are therefore allowed to form local companies without a local partner, provided that all of the shareholders are American. For such cases, the minimum share capital is OMR20,000 (approx. US$52,000) and is not required to be paid-up;
4. An LLC can undertake work in both the public and private sectors and requires a minimum of two shareholders.
5. An LLC must allocate 10% of its net profits to a legal reserve until the legal reserve reaches one-third of the LLC’s share capital.

Oman free zone company

1. Companies incorporated in Oman Free Zones are permitted to i) be 100% foreign-owned ii) conduct business with local customers. They also have a low or no minimum paid up capital investment;
2. Free zone companies generally require a minimum of two shareholders and are exempt from i) corporate income tax ii) custom duties and iii) have only 10% of the workforce needs to be Omani
3. Best uses: Free zones are recommended for manufacturing or trading companies that wish to use Oman as a base to expand operations in the middle eastern region.

Oman branch office

1. Oman’s Commercial Companies Law limits the activities of branches to government contracts or to areas economically necessary for Omani development, except if the parent company is fully owned by a GCC or US national. In both cases, branches are required to have a local agent to sponsor Oman visas and licenses;
2. The branches are also required to obtain approval from the Ministry of Commerce and Industry (MOCI), and the license is only valid for the duration of the project. To issue an operations license, the ministry will require a bank guarantee of US$390,000;
3. A Branch is an entity which is wholly ‘owned’ by its foreign parent company. It is viewed as an extension of its parent company and does not have a separate legal personality (and therefore its parent will be responsible for the liabilities of the Branch). The establishment of a Branch is usually linked to a contract with an Oman Government entity (or an entity which is held to be sufficiently linked with the Oman Government) and the life span of the Branch usually mirrors the duration of such contract.
4. Best uses: This type of business entity is only recommended for Clients that have already secured a project contract with the Omani government.
5. Branches are regulated by the constitutional documents of their parent companies. They are managed by a general manager, who will have the powers and authorities granted to him/her under a power of attorney issued by the parent company. The parent company of a branch is required to guarantee the obligations and liabilities of the branch pursuant to the letter of undertaking. Therefore, the liability of a branch is not ringfenced; and
6. Both branches and representative offices are regulated by the constitutional documents of their parent companies. They are managed by a general manager, who will have the powers and authorities granted to him/her under a power of attorney issued by the parent company.
7. An application can be made to the MOCIIP for registration of a branch. The supporting documents that will need to be provided include the following:
   • The commercial registration certificate of the foreign company in its principal place of business, which includes the foreign company’s commercial activities;
   • The incorporation documents of the foreign company (ie, the Articles of Association, Memorandum of Association or the Constitutive Contract, as the case may be);
   • The authorisation document issued from the foreign company to the manager(s) of the branch to carry out the management of the branch;
   • A letter of undertaking from the foreign company to bear liability in relation to the acts of the branch; and
   • Copies of the passports/Omani identity cards of the authorised managers.
8. Preparing these documents can take time for the same reasons given in relation to LLCs above. All documents (except for copies of passports/Omani identity cards) must be translated into Arabic and duly notarised, legalised, or apostilled, as the case may be. As with an LLC, the branch’s activities will need to be specifically licensed.

Representative office

1. A foreign firm may open a commercial representative office in Oman solely for the purpose of marketing and promotion of its products or services. A representative office is not allowed to sell products or services or to engage in other forms of commercial activity. However, it may sponsor and hire employees. While the Omani representative office is 100% foreign-owned and controlled, it is not permitted to make direct sales within Oman. Its scope of activities is limited to i) promotion of the parent company’s business and ii) market research; and
2. Representative offices must have i) at least one appointed individual representative ordinarily resident in Oman and ii) are also permitted to sponsor and hire local or foreign employees; and
3. Best uses: Representative office are recommended for Clients that wish to promote and explore the Omani market, without carrying any commercial activity in the country; and
4. The permitted activities of a representative office are limited to the following:
   • contacting customers to promote the products or services of the foreign company or institution it represents;
   • contacting exporters and sellers of raw, manufactured and semi-manufactured materials required by the foreign company or institution it represents and removing any obstacles hindering quick access to them; and
   • notifying the foreign company or institution it represents of any complaints it receives in relation to the products or services and overcoming difficulties related to the distribution of such products or the provision of services.
5. A representative office is prohibited from engaging in any of the following activities:
   • import, export or sale, except for the importation of commercial samples of goods produced by the foreign company or institution it represents for the purpose of promotion;
   • promotion of products or services other than those produced or offered by the foreign company or institution it represents; or
   • contacting consumers directly.

Joint Stock Company (SAO)

1. A Joint Stock Company is formed by a minimum of three shareholders;
2. Joint stock companies that trade their shares publicly are referred to as public joint stock companies (SAOG), and require i) a minimum share capital of OMR2 million (approx. US$5.2M) and ii) an Omani shareholder with 30% of the shares and iii) at least 40% of the shares to be offered for public subscription;
3. Joint stock companies that do not offer shares to the public are known as private joint stock companies (SAOC), and require i) a minimum share capital of OMR500,000 (approx. US$1.3M) and ii) a 30% Omani shareholding;
4. An SAOC can undertake work in both the public and private sectors and requires a minimum of three shareholders.
5. It is subject to stricter initial and ongoing corporate governance requirements than an LLC or SPC

Joint Venture (JV)

1. A JV is an internal agreement between two or more parties (individual or companies, nationals or foreigners) whereby one party performs business in his/her personal name while the profits/losses of the proceeds are shared;
2. A JV is not a legal entity and therefore does not require any form of registration with, nor has protection from, the local Authorities;
3. A JV agreement must remain undisclosed to third parties, or will otherwise be treated as a General Partnership;
4. Best uses: A foreign company undertaking a specific short-term project in Oman.

Commercial agency

1. Foreign companies looking to do business in Oman that are not keen to register a local company or branch in Oman are permitted to conduct business through local commercial agents;
2. Unlike the JV, the agreement with the local agency must be registered with the Ministry of Commerce and Industry (MOCI);
3. Clients working through a commercial agent are still required to file annual tax returns and pay corporate income tax on their Omani income;
4. Only Omani nationals registered with the Oman Chamber of Commerce or local entities with 51% local shareholding can be appointed as commercial agents;
5. For the duration of the agreement, only the commercial agent is permitted to engaged directly in the sale of products and services in the country.

Table of comparison between Oman entities